In Thailand, the employer-employee relationship is governed by a series of laws and regulations, the chief ones of which are the Thai Labour Protection Act B.E.2541 (LPA) and the Thai Civil and Commercial Code.
Other important legislation includes the:
- Labour Relations Act;
- Social Security Act, which established the labour court and its procedure;
- State Enterprise Labour Relations Act;
- Workmen’s Compensation Act;
- Foreign Employment Act.
These laws, which are applicable to both Thai and foreign workers, cover all areas related to employment such as working hours, holidays and leave, notice, overtime, sick pay and severance.
The Ministry of Labour (MOL) is the primary authority responsible for setting and enforcing minimum employment standards within the country. While Thailand does not mandate a written agreement between employers and staff, it does impose strict labour regulations with regards to working terms and conditions.
In practice, therefore, it is advisable for employers to set out written terms and conditions of employment in order to avoid legal disputes at a later date or liability with regards to remuneration. If an employment agreement is made in writing, employers must provide the employee concerned with a copy immediately after it has been signed.
Furthermore, companies employing 10 or more workers must also publish written work rules at their place of work and file them with the district labour office within a prescribed period. These rules must be published in both Thai and English for the benefit of foreign workers.
The published rules must include information about the following:
- Work days;
- Regular working hours and rest periods;
- Holidays and rules for taking holidays;
- Rules concerning overtime work and working over holiday periods;
- When and where the payment of basic, overtime, holiday and holiday overtime pay will take place;
- Leave and rules for taking leave;
- Discipline and punishment;
- Complaints procedure;
- Termination of employment, severance pay and special severance pay.
In addition, a workplace with 20 or more employees must also provide a written agreement about working conditions as part of an employee’s contractual employment terms.
Probationary period
Thai law does not explicitly mention probationary periods in regard to employment relationships. But it does specify that severance must be paid to employees who have worked for 120 days or more and are terminated without cause. Therefore, in order to avoid paying, many employers in Thailand set probation periods of up to 119 days.
Working hours
Provisions relating to working hours are set out in ministerial regulations that are issued by the MOL and are based on the nature and type of work being undertaken. In general, working hours must not exceed eight hours per day or 48 hours per week. For employees involved in hazardous work, normal working hours are restricted to seven hours per day and 42 hours per week
Terminating employment contracts and severance pay
If an employment agreement does not specify the contract’s duration, both employers and employees have a statutory right to terminate the contract after giving prior notice. The minimum notice period must be at least one week and not more than three months
But in certain circumstances, employers may dismiss staff members without providing prior notice or due compensation, for example, if an employee intentionally causes them to suffer losses, does not perform their duties honestly or commits a crime against them or another employee
If a staff member is terminated, the LPA entitles them to severance pay that is equivalent to 30 days’ wages if they have worked for at least 120 days. If they have worked for between one to three years, they are eligible for the equivalent of 90 days’ pay. Those working for six to 10 years, meanwhile, are entitled to 240 days’ pay, while staff with more than 10 years’ service are entitled to 300 days-worth.
Personal income tax
For the purposes of taxation, individual taxpayers are categorised into “resident” or “non-resident” individuals. Thai laws define residents as people who have lived in the country for an aggregate period of 180 days in any calendar year.
As a result, most foreign employees working in Thailand qualify as residents and are liable to pay tax on both their income earned in the country and on income earned abroad. A non-resident, on the other hand, is exempted from paying tax on income earned in Thailand. Current personal income tax rates for resident individuals are laid out in the table below.
Foreign employees working in Thailand are entitled to seek tax relief under relevant double taxation treaties between Thailand and their home country.
Social protection
Employers are usually required to register their employees with the Workmen Compensation and Social Security Fund (SSF). Both employers and employees must contribute to the SSF at a rate of 5% of the staff member’s income, up to a maximum of THB750 (US$23) per month.
Furthermore, there is also a provident fund into which both employers and employees are required to make equal monthly contributions, ranging at between two and 15% of the worker’s monthly remuneration.
Conclusion
Although Thailand has a complex and strictly regulated employment system, Thai labour laws are generally-speaking more favorable to employees than their employers. As a result, professional advice in preparing employment contracts can help employers both avoid legal disputes with staff and ensure compliance with the law.
This article was first published on ASEAN Briefing.
By Vasundhara Rastogi, editor, Dezan Shira & Associates
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
In Thailand, the employer-employee relationship is governed by a series of laws and regulations, the chief ones of which are the Thai Labour Protection Act B.E.2541 (LPA) and the Thai Civil and Commercial Code.
Other important legislation includes the:
- Labour Relations Act;
- Social Security Act, which established the labour court and its procedure;
- State Enterprise Labour Relations Act;
- Workmen’s Compensation Act;
- Foreign Employment Act.
These laws, which are applicable to both Thai and foreign workers, cover all areas related to employment such as working hours, holidays and leave, notice, overtime, sick pay and severance.
The Ministry of Labour (MOL) is the primary authority responsible for setting and enforcing minimum employment standards within the country. While Thailand does not mandate a written agreement between employers and staff, it does impose strict labour regulations with regards to working terms and conditions.
In practice, therefore, it is advisable for employers to set out written terms and conditions of employment in order to avoid legal disputes at a later date or liability with regards to remuneration. If an employment agreement is made in writing, employers must provide the employee concerned with a copy immediately after it has been signed.
Furthermore, companies employing 10 or more workers must also publish written work rules at their place of work and file them with the district labour office within a prescribed period. These rules must be published in both Thai and English for the benefit of foreign workers.
The published rules must include information about the following:
- Work days;
- Regular working hours and rest periods;
- Holidays and rules for taking holidays;
- Rules concerning overtime work and working over holiday periods;
- When and where the payment of basic, overtime, holiday and holiday overtime pay will take place;
- Leave and rules for taking leave;
- Discipline and punishment;
- Complaints procedure;
- Termination of employment, severance pay and special severance pay.
In addition, a workplace with 20 or more employees must also provide a written agreement about working conditions as part of an employee’s contractual employment terms.
Probationary period
Thai law does not explicitly mention probationary periods in regard to employment relationships. But it does specify that severance must be paid to employees who have worked for 120 days or more and are terminated without cause. Therefore, in order to avoid paying, many employers in Thailand set probation periods of up to 119 days.
Working hours
Provisions relating to working hours are set out in ministerial regulations that are issued by the MOL and are based on the nature and type of work being undertaken. In general, working hours must not exceed eight hours per day or 48 hours per week. For employees involved in hazardous work, normal working hours are restricted to seven hours per day and 42 hours per week
Terminating employment contracts and severance pay
If an employment agreement does not specify the contract’s duration, both employers and employees have a statutory right to terminate the contract after giving prior notice. The minimum notice period must be at least one week and not more than three months
But in certain circumstances, employers may dismiss staff members without providing prior notice or due compensation, for example, if an employee intentionally causes them to suffer losses, does not perform their duties honestly or commits a crime against them or another employee
If a staff member is terminated, the LPA entitles them to severance pay that is equivalent to 30 days’ wages if they have worked for at least 120 days. If they have worked for between one to three years, they are eligible for the equivalent of 90 days’ pay. Those working for six to 10 years, meanwhile, are entitled to 240 days’ pay, while staff with more than 10 years’ service are entitled to 300 days-worth.
Personal income tax
For the purposes of taxation, individual taxpayers are categorised into “resident” or “non-resident” individuals. Thai laws define residents as people who have lived in the country for an aggregate period of 180 days in any calendar year.
As a result, most foreign employees working in Thailand qualify as residents and are liable to pay tax on both their income earned in the country and on income earned abroad. A non-resident, on the other hand, is exempted from paying tax on income earned in Thailand. Current personal income tax rates for resident individuals are laid out in the table below.
Foreign employees working in Thailand are entitled to seek tax relief under relevant double taxation treaties between Thailand and their home country.
Social protection
Employers are usually required to register their employees with the Workmen Compensation and Social Security Fund (SSF). Both employers and employees must contribute to the SSF at a rate of 5% of the staff member’s income, up to a maximum of THB750 (US$23) per month.
Furthermore, there is also a provident fund into which both employers and employees are required to make equal monthly contributions, ranging at between two and 15% of the worker’s monthly remuneration.
Conclusion
Although Thailand has a complex and strictly regulated employment system, Thai labour laws are generally-speaking more favorable to employees than their employers. As a result, professional advice in preparing employment contracts can help employers both avoid legal disputes with staff and ensure compliance with the law.
This article was first published on ASEAN Briefing.
By Vasundhara Rastogi, editor, Dezan Shira & Associates
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
